Bushveld Minerals* (LON:BMN) – Financing agreement signed with Barak Fund
Blenheim Natural Resources Plc (LON:BNR) – Blenheim acquires 30% interest in Nashwan from Harry Sutherland
Keras Resources PLC (LON:KRS) – Move into cobalt and nickel exploration
Ncondezi Energy (LON:NCCL) – Shanghai Electric Power $25.5m investment to fund balance of power development costs
FTSE 350 Mining Index is flat this morning as base metals fall while reports by Chinese steel lobby show expected declines in the steel production in China this year.
• Gold is down marginally amid stronger US$ index and is on course to post a 9% increase, the first in the last three quarters and the strongest quarterly gain since Q1/16.
• All six base metals are trading lower this morning.
• Steel production is expected to contract 2% this year compared with a 1.2% increase in 2016, according to the China Iron & Steel Association.
• “We have finished with peak steel demand and consumption,” the Association said.
• Prices are expected to drop to an average of $65/t this year while the trading range is expected to be between $55-90 during the year.
• Brent is slightly off this morning after surging 2.4% on Wednesday while a higher than expected decline in US gasoline stocks countered the news over an increase in production which hit the strongest level in more than a year.
Dow Jones Industrials -0.20% at 20,659
Nikkei 225 -0.80% at 19,063
HK Hang Seng -0.26% at 24,328
Shanghai Composite -0.96% at 3,210
FTSE 350 Mining +0.22% at 15,730
AIM Basic Resources +1.39% at 2,642
Economics
US
Date Index Period Actual Est Previous
Tuesday SP CS 20-City Property Prices Jan %mom/yoy 0.9/5.7 0.7/5.6 0.9/5.6
CB Consumer Confidence Mar 125.6 114.0 114.8
Wednesday Pending Home Sales Feb %mom 5.5 2.5 -2.8
Thursday Q4 GDP (Final reading) vs Previous reading 2 1.9
Weekly Jobless Claims 247k 261k
Friday Personal Income Feb %mom 0.4 0.4
Personal Spending Feb %mom 0.2 0.2
PCE Feb %mom/yoy 0.1/2.1 0.4/1.9
Core PCE Feb %mom/yoy 0.2/1.7 0.3/1.7
Source: Bloomberg
China – Mixed reports on economic performance of the economy in Q4/16 are being released.
• A quarterly survey of more than 2,000 companies prepared by the Cheung Kong Graduate School of Business showed the business sentiment gauge posted a fourth consecutive decline in Q4/16.
• Additionally, the survey suggests industrial overcapacity remained at historic highs through the quarter despite official initiatives to tackle the problem.
• Employment dropped but at a slower pace extending losses recorded during the year.
• Survey findings diverge with Markit PMIs which pointed to strong growth in new orders and high degree of optimism posted in Q4 last year.
Germany – Early regional data point to a slowdown in the headline CPI number in Mar with the nationwide number out later in the afternoon.
Index Period Actual Est Previous
CPI Saxony YoY Mar 1.8% 2.4%
CPI Brandenburg YoY Mar 1.4% 2.0%
CPI Hesse YoY Mar 1.7% 2.5%
CPI Bavaria YoY Mar 1.7% 2.1%
CPI EU Harmonized YoY Mar P 1.9% 2.2%
Source: Bloomberg
Spain – Consumer prices growth slowed through Mar down from a four year high recorded in Feb.
• CPI (%yoy, EU Harmonised): 2.1 v 3.0 in Feb and 2.7 forecast.
Turkey – Economists cut growth outlook and raised inflation expectations over the next five quarters compared with estimates released in Feb.
• Unemployment is also set to post a worsening trend with the rate climbing to 11.5% and 11.4% in 2017-18, up from 11.1% and 10.9% estimated previously.
• Weak economic data come in amid preparations for the Apr 16 referendum that is set to grant more power to the executive branch of the government.
South Africa – Jacob Zuma may find himself in the middle of the cabinet crisis as around 12 ministers are said to be prepared to resign should President sack Finance Minister Pravin Gordhan, according to Bloomberg which cites four people familiar with the situation.
• Officials said that may potentially participate in a vote of no confidence in the president should it be called by the oppositions or ruling ANC members.
• The rand strengthened 0.8% this morning but remained some 4.2% off levels seen at the beginning of the week before speculation over a possible dismissal of Pravin Gordhan hit the market.
Currencies
US$1.0753/eur vs 1.0799/eur yesterday. Yen 111.01/$ vs 111.22/$. SAr 12.935/$ vs 13.071/$. $1.242/gbp vs $1.239/gbp.
0.765/aud vs 0.764/aud. CNY 6.892/$ vs 6.892/$.
Commodity News
Precious metals:
Gold US$1,251/oz vs US$1,250/oz yesterday
Gold ETFs 58.9moz vs US$58.9moz yesterday
Platinum US$957/oz vs US$954/oz yesterday
Palladium US$790/oz vs US$791/oz yesterday
Silver US$18.16/oz vs US$18.08/oz yesterday
Currencies
US$1.0753/eur vs 1.0799/eur yesterday. Yen 111.01/$ vs 111.22/$. SAr 12.935/$ vs 13.071/$. $1.242/gbp vs $1.239/gbp.
0.765/aud vs 0.764/aud. CNY 6.892/$ vs 6.892/$.
Commodity News
Precious metals:
Gold US$1,251/oz vs US$1,250/oz yesterday
Gold ETFs 58.9moz vs US$58.9moz yesterday
Platinum US$957/oz vs US$954/oz yesterday
Palladium US$790/oz vs US$791/oz yesterday
Silver US$18.16/oz vs US$18.08/oz yesterday
Company News
Bushveld Minerals* (LON:BMN) 7.7p, Mkt Cap £56.3m – Financing agreement signed with Barak Fund
• Bushveld Minerals has signed a financing, sales and marketing agreement with the Barak Fund.
• The agreement is for:
o a bridge loan of up to US$11m repayable within two months to fund the acquisition.
o An inventory financing facility of up to US$7m to the Strategic Minerals Corp ‘SMC’ subsidiary to monetise Vametco’s Notrovan inventory. The facility has a term of six months.
o The Barak Fund are getting their pound of flesh for the financing with a total fee of $939,077 in interest, fees and legal charges.
o The good part for shareholders is that “the company does not expect to undertake a placing in order to repay the bridge loan and will divulge details in due course”.
o This deal combined with the recent Wogen financing means that Bushveld can cover the cost of the SMC acquisition with minimal dilution to shareholders while ensuring there is some US$13m of working capital ($7m from Barak and $6m from Wogen).
o Bushveld Minerals is giving a charge over the SMC shares, cession of dividends owed by SMC to Bushveld and a guarantee over BVL's payment obligations under the Bridge Loan.
o Bushveld are also injecting US$800,000 to complete the financing.
Conclusion: This looks like a really smart deal whereby Bushveld Minerals is able to support its purchase and final acquisition of the Vametco vanadium mine and plant in South Africa. The deal demonstrates the support and use of innovative financing solutions to ensure the deal gets done. We also reckon that rising earnings from the Vametco plant due to higher vanadium prices should serve to repay debt used in the acquisition relatively quickly.
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Blenheim Natural Resources Plc (LON:BNR) 0.6p, mkt cap £2.4m – Blenheim acquires 30% interest in Nashwan from Harry Sutherland
(Formerly Coburg Group)
• Blenheim Natural Resources know how to jump on a bandwagon when they see one. The group announces today that it is acquiring a 30% stake in Nashwan Holdings from its sole shareholder, Harry Sutherland for £200,000 and 75m shares in Blenheim.
• The good bit is that Harry is putting £100,000 of this straight back into the asset to fund exploration and prospecting costs.
• Nashwan holds the Djidje prospecting permit in the Republic of Mali as well as a registered application for a prospecting permit in Menianbala.
• The company gives no tangible details on the exploration other than its proximity to other mineral assets in the region
• These are early days for the Nashwan assets but there is considerable interest in assets in Mali due to exploration success at Birimian Limited and Kodal Minerals
• Blenheim also mention that their option to acquire a 30% interest in the Dieba permit from Xantus for £175,000 in cash plus 60m shares which was due to expire tomorrow has been extended till 30 June 2017. The option cost Blenheim £25,000.
Keras Resources PLC (LON:KRS) 0.4p, mkt cap £6.9m – Move into cobalt and nickel exploration
• Keras Resources has announced its intention to move into exploration for cobalt and nickel exploration in West Africa.
• We are not sure what this means for the company’s manganese assets in Togo but the move into metals where there is greater growth in demand is hard to criticise. We just wonder why it took so long to get round to it given the highly expert board given that the boom in battery metals has been developing for some time.
• Perhaps it’s because Keras is busy spinning out their gold assets into an Australian listed company, Calidus Resources. We note Calidus has A$5m cash and will be debt free.
• A recent presentation shows Keras carrying US$2.2m of debt attached to Keras Gold Australia, never a good sign for an exploration company.
• The debt disappears in the next slide indicating to us that it is conveniently absorbed into Calidus. Let’s hope so?
• So that leaves Keras with 85% of a nice looking manganese asset, a bunch of new licenses in West Africa a 60% stake in Calidus Resources on the ASX and a statement in bold capitals stating that Keras will not be a cash shell. We wonder if that is a statement for us or for the regulators who appear very keen to kill off anything which looks like a shell company.
• Cobalt is a key component in most batteries and has volatile production history with more than half the world’s cobalt produced in the DRC.
• There was a time when hand-picked cobalt ores were being flown out of the Congo by warlords using daring pilots in low-level flights to neighbouring countries.
• The Chinese recently bought the world’s largest cobalt producer, Tenke Fungurume in the DRC for the equivalent of US$4.75bn. We suspect the acquisition was as much for its cobalt as for its copper as the mine produces ~13% of global cobalt supply. The mine is producing around 16,000tpa of cobalt hydroxide as a byproduct of just over 200,000tpa of copper. The mine cost around some $3bn to build.
• Back to Keras, the team tell us that they have submitted five applications over vacant ground in West Africa with known cobalt and nickel mineralisation. Rock chip samples show 0.19% cobalt on one with highs of 0.25% cobalt.
• We look forward to more cobalt news to come
Ncondezi Energy (LON:NCCL) 4.4 pence, Mkt Cap £11m – Shanghai Electric Power $25.5m investment to fund balance of power development costs
• Ncondezi Energy has updated the market with respect to the agreement with Shanghai Electric Power ‘SEP’ to fund up to $25.5m to fund the balance of the power project development costs to financial close in return for a 60% holding in Ncondezi Power Holding 2 Ltd.
• The good bit is that SEP appears committed to getting the deal done with key meetings between SEP, EDM and Mozambican government held in Shanghai and Mozambique
• There is a $3m pre-investment to the Joint Development Agreement ‘JDA’ to help Ncondezi Energy finalise the agreement and allows the power project to continue development as planned without delaying the ‘financial close.
• We understand Shanghai Electric Power are able to export funds despite tougher capital controls out of China
• The terms of financing are said to be well advanced and looking to close soon
• There is more detail in the RNS today
Conclusion: The update indicates the project is advancing through the necessary processes towards financial close which is now planned for Q3 2018. The company will update further once binding agreements have executed. Given the shortage of power in Southern Africa and the problems last year when water levels fell in Kariba to around 16% of capacity we would hope the Mozambique government might move quickly on this one. Ncondezi appear well placed to help push this project through.